India renegotiates price of LNG from Gorgon

According to Reuters, India has renegotiated the price of LNG from the Gorgon project in Australia, in order to make it more affordable for price-sensitive domestic customers.

In a tweet, the Indian oil minister, Dharmendra Pradhan, said: “Indian customers will receive (Gorgon) LNG volumes at an amicable price soon. This is done in a similar way to what we did with LNG from Qatar.”

In 2009, Petronet LNG – India’s larger gas importer – reached an agreement with Exxon Mobil Corp. to purchase 1.5 million tpy of LNG from Gorgon for a 20-year period. At the time, the company agreed to buy the fuel at a cost equivalent to 14.5% of the oil price, and, additionally, to pay for the shipping freight.

Reuters claims that cargo deliveries under this deal commenced in January this year, with the landed price of gas costing approximately US$11 – US$13/million Btu, which is almost double that of Asian spot LNG prices.

Two sources with knowledge regarding the negotiation reportedly said that the prices of Gorgon gas are now linked to approximately 13 – 13.5% of the global oil price on a delivered basis.

Reuters claims that this recent price renegotiation illustrates how softening oil prices, as well as a global supply glut, are forcing LNG exporters to offer improved deals in order to maintain their share in global energy markets.

India is reportedly looking to gradually shift towards a gas-based economy, and is aiming to double the share of the fuel in its energy mix to 15% in the coming years.

Reuters claims that Pradhan did not provide specifics regarding the changes in the pricing formula.